A middleman in an ambiguous situation-Experimental evidence

Kazuhito Ogawa, Yuhsuke Koyama, Sobei H. Oda

Research output: Contribution to journalArticle

Abstract

This paper describes how undergraduates play intermediaries. A series of experiments was conducted to see how subjects play the monopolistic intermediary against given but unknown supply and demand. The results show that most subjects search for the bid and the ask prices that equalise the purchasing quantity with the selling quantity; then, keeping the trading quantity, they adjust the prices to obtain a locally maximum profit. This suggests that monopolistic firms can act as intermediaries even if they are not as informed as they are supposed to be discussed in the market microstructure theory. In addition, we investigate how people cope with ambiguity.

Original languageEnglish
Pages (from-to)412-439
Number of pages28
JournalJournal of Socio-Economics
Volume35
Issue number3
DOIs
Publication statusPublished - 2006 Jun
Externally publishedYes

Keywords

  • Experimental economics
  • Market microstructure
  • Middleman
  • Two-stage search

ASJC Scopus subject areas

  • Economics and Econometrics

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